Jilk Incorporated's contribution margin ratio is 61% and its fixed monthly expenses are $43,000. Assuming that the fixed monthly expenses do not change, what is the best estimate of the company's net operating income in a month when sales are $128,000?

Question

Quizplus · Accepted Answer

First, calculate the contribution margin (CM) using the contribution margin ratio (CM Ratio) and sales (S):

CM = CM Ratio x S
CM = 0.61 x $128,000
CM = $78,080

Next, calculate the net operating income (NOI) by subtracting the fixed expenses (FE) from the CM:

NOI = CM - FE
NOI = $78,080 - $43,000
NOI = $35,080

Therefore, the best estimate of the company's net operating income in a month when sales are $128,000 is $35,080. Option C is the correct choice.

Jilk Incorporated's Contribution Margin Ratio Is 61% and Its Fixed